The public expenditure consequences of failure to invest early are immense. Further expenditure will be needed to fund disrupted classes, missed opportunities to get qualifications or work, antisocial behaviour, expensive interaction with the criminal justice system, drug rehabilitation, or a lifetime dependency on benefits. I am delighted to have secured this debate to explore two questions that are central to the policies that we are pursuing in Nottingham to develop a policy of early intervention that can be sustained in the long term. Those questions are how to transform successful local pilots into public services, and how to save the taxpayer and Government billions in public expenditure on the costs of failure through immediate investment in early intervention.

Our local and national partners are working with One Nottingham, the local strategic partnership, which I chair, and are exploring how we can take forward the concept of the “early intervention city”. Having developed the first stage—a vision of an “early intervention city” and a package of evidence-based measures—the next stage is to develop the package of policies that will give the vision shape and direction. Local and national partners are committed to doing that in the next few months. However, in today’s debate I shall look still further ahead to the third stage, by asking how the measures can be funded in the long term.

In the short term, many of the components of an early intervention package are already being funded by local partners, or can be assisted by One Nottingham’s £15 million neighbourhood renewal fund. Equally, the medium-term effort covering, say, year three or four, could be sustained by mainstreaming by local partners including the police, primary care trust, city council and so on. However, maintaining pilots by local mainstreamed funds is different from the long-term requirement to roll out successful pilots over a wider area. That cannot possibly be done purely from local funding, particularly in an era when public sector settlements are likely to be tougher than in the past few years.

For example, funding the nurse-family partnerships as part of One Nottingham’s early intervention package would cost a manageable £700,000 over two years. When the pilot has reached the end of the two years, our expectation might be that the primary care trust and other local partners fund it. However, rolling out a successful nurse-family partnership over the whole city of Nottingham could take as much as 10 times the expenditure that was required to sustain the pilot. Clearly, that would be an unacceptable burden on local partners. We therefore need to examine the wider context of public expenditure—when we transform a local pilot into a public service, we must also make the transition from local finance to public spending. Remarkably little has been done to address that. It requires a cultural shift to take place through the medium of the comprehensive spending review.

Public expenditure should be rebalanced to favour early intervention to tackle the causes of problems, and consequently to reduce the need to spend ever larger amounts of public money on containing the symptoms. The nurse-family partnership again provides a useful example. We can pay a few thousand pounds for a health visitor to assist a single mother to develop effective parenting skills so that her newborn can be given social, communication and emotional competences to ensure that the child is school-ready, or we can continue to allow children to go to school unable to speak in sentences or to recognise letters and numbers, as many in my constituency do according to local Ofsted reports. I estimate that leaving speech and language problems unaddressed in this year’s cohort in reception classes will cost nearly £4 billion over their lifetimes. I am not talking about picking off tiny groups—it is a problem of volume in my constituency, not one of an isolated or small group. Frighteningly from the financial viewpoint, it needs mainstream service reorientation and not one-off special measures. However, the savings are enormous.

As James Heckman demonstrated in his Nobel prize-winning work in 2000, intervening early and giving children the wherewithal and the social skill set to learn and interact is cheaper than the lengthy tail of public expenditure that comes with failure. He shows that the economic payback of such investment is three to six times higher pre-school than post-school. Figures from the Department for Education and Skills show that more than three times as much is being spent per head on higher education than on pre-school. That is a complete reversal of the optimal pattern of expenditure.

Similarly, Dr. Bruce Perry's work shows that spending on programmes intended to change the brain are eight times higher at the age of 20 than at the age of three. Yet the same study shows the human brain to be more than five times more malleable at the age of three than at 20. Early intervention means more brains per buck. It is a switch from mis-spending, which is driven by inertia and short-termism. We want to see strategic thinking aspired to and achieved in the CSR.

One of the most stunning financial pay-offs in the UK recently has been the Government’s measures to get people back into work, converting the enormous pool of unemployed who are a massive drain on public funds into taxpayers making a positive net contribution. That same philosophy now has to be applied to those who are socially excluded generation after generation. Breaking that cycle will release massive amounts of money for expenditure in other areas. That argument has to be accepted at the political level.

At the moment, as part of the CSR, the Treasury and DFES are undertaking a policy review. They issued an excellent interim report in January. The CSR provides the vehicle to ensure the prevention of problems rather than merely servicing the consequences. The strategy needs to be co-ordinated across Departments. The current system of allocating CSR spend separately to each Department means that the DFES or Department of Health, for example, have no interest in investing in early intervention that will reduce crime and therefore benefit the Home Office's budget, but not their own. Their spending is influenced solely by their own immediate public service agreement targets. We should consider top-slicing those separate budgets to create a national early intervention fund, or create cross-cutting PSA targets aimed at reducing the effects of social disadvantage. Only the Treasury has the interest in savings to the public purse that transcends narrow departmental ambitions.

A good example of decision making is the Treasury's recent announcement in the pre-Budget report that the Government will pick up funding for one early intervention initiative that is close to my heart, namely the “Every Child a Reader” project, which provides one-to-one reading recovery teaching to disadvantaged six-year-olds who are struggling to learn to read and write. That was a bold step, with a clear spend-to-save purpose. It was influenced by the economic analysis of the return on investment provided by the scheme. However, welcome initiatives need to become part of a coherent strategy to identify the key barriers that disadvantaged children experience in their early years and to put in place a systematic plan to address those barriers through robust evidence-based interventions, not just in one city but nationwide.

One area that we would be keen to explore with the Government from Nottingham's point of view is revitalising the concept of invest to save. I was excited to see that £100 million was spent on the benefit service as one of the first invest-to-save projects. Minister, we could build an early intervention city in Nottingham for that, save £1 billion in public expenditure, end educational under-attainment and social and emotional deskilling in our city, and give back some change as well.

Page 6 of the CSR policy review paper concedes that

“estimating the costs of poor outcomes is difficult.”

None the less, it estimates a £6 billion saving if

“children with poor education could be raised to the average.”

It also says that the additional costs of those not currently engaged in employment, education or training is at least £8.1 billion. Similar stories can be told in health, skills, law and order, and benefits—all in billion pound denominations—so that pretty soon we are talking serious money. All that can be reflected locally on Nottingham’s 940 NEETS—young people not in education, employment or training—which is one in 10 youngsters. I joked about the sum being £100 million for Nottingham, but that alone costs my city £216 million over their lifetime according to recent figures from the reform group.

Will the Minister undertake today to commission more work from the Treasury to discover several things? First, what money could be saved on all the public services that have to be deployed around an individual who has not attained at average levels? Secondly, what amount of investment would be needed to ensure early attainment to provide the foundation for that individual and therefore remove the costs of a lifetime of remedial public expenditure? Thirdly, what robust financial tools will we need to enable early intervention investment to be discounted against later savings?

Will some serious modelling and analysis of the matter be commissioned inside or outside the Treasury? If we are to invest in early intervention, pre-emption and prevention, we need to devise tough financial tools to enable organisations such as our local strategic partnership to borrow against future savings, perhaps using venture capital, bond issues or public works loans. That might best be considered on an individual account basis. If a potentially under-achieving person is allocated, say, £1 million of public expenditure over their lifetime, can that be front-loaded to save some of that £1 million? One Nottingham would be more than happy to pilot such a project if the Treasury team felt that it would be useful.

Another area where we would be keen to partner the Treasury is performance management. That applies at national level where a light-touch public service agreement on early intervention should be agreed with all the relevant Departments if public expenditure is genuinely to become less reactive, but refocused on a metaphorically healthy diet rather than ever larger dollops of comfort food in respect of public expenditure. When the Government impose statutory duties on localities, they need to be affirming not confining, and a spur not a break to activity.

At local level, incredibly able local partners drown under middle England targets as well as inspection and accountability regimes that suffocate local talent and hand-crafted solutions in favour—in the case of my local strategic partnership—of 1,000 local area agreement, floor target action plan, community strategy boxes that we must tick. I am privileged that I can—and do—fight back on such issues. However, no local career public servants have that luxury. Indeed, until innovative and creative thinking on early intervention is sanctioned officially by the PSA and performance management regimes, it can be seen even by the best local chief officers as a threat to be controlled rather than an opportunity of which to be taken advantage.

I shall leave for another debate an excursion into the vital local issues where most public services are increasingly administered with little or no real democratic governance. However, cultural and democratic evolution need to lie alongside financial creativity if our efforts are to be sustainable.

Nottingham is pioneering the vision of early intervention city through a package of measures comparable to those found at Greater Littleton in Denver. Some are already under way in Nottingham, including the teaching of social behaviour at primary schools based on the foundation of the social and emotional literacy programme that the Government are rolling out; the nurse-family partnership to which I referred earlier; intensive family support for the 50 most difficult families; and an effective parenting skills programme.

In addition, local and national partners could consider other locally led but evidence-based programmes, including pre-parenting skills for teenagers so that they understand the responsibility of raising a child and how to build and maintain personal and family relationships, and an effective mentoring scheme, perhaps like the successful big brother, big sister scheme in the USA. Other possibilities include the roots of empathy scheme, under which a class adopts a baby to develop empathetic behaviour, and the teens and toddlers scheme, which is favoured by the Cabinet Office. Finally, health services, the police and children’s services could share data so that we can catch people at the earliest possible stage. Whatever package is agreed, it will focus relentlessly on the causes of problems and will be driven by local and national partners working together.

We will deliver every aspect of the partnership locally, and Departments are committed to doing so nationally. We now need the Treasury to come to the party—we need to move from schemes to services. The prize is to finish servicing the endless stream of problems and to break the intergenerational cycle of underachievement through early intervention. All that I ask the Minister to do today is to commit to engage in a serious continuing dialogue with me and the steering group of local and national partners—our kids deserve nothing less. If the Treasury can give that commitment, we will be able to do some extremely good work together, with tremendous positive consequences not only for youngsters, but for their parents and our society.

I congratulate my hon. Friend the Member for Nottingham, North (Mr. Allen) on securing the debate; he has been generous in the amount of time that he has given me to respond. It is a great relief to be able to have this debate today, because it had to be rescheduled on a previous occasion, when the House finished its business early. My hon. Friend was unable to be here for that debate, because he was in Nottingham in his role as chair of One Nottingham, the local strategic partnership. He was meeting a team of Ministers who had gone up to see the work that he was leading in Nottingham on these very issues. I am happy to give him the assurance for which he asked and to say that the Treasury, like the other parts of the Government with which he has discussed the issue and which have visited Nottingham, is happy to engage with the detail of these matters.

As my hon. Friend says, the key issue is to ensure that decision making and spending are properly co-ordinated not only across Departments at the centre in Whitehall, but at local level. I have always been a champion—as a Minister, and before that as an adviser—of the role that local strategic partnerships can play in bringing together different agencies locally to make policy work more effectively. Over the years, however, we have all learned that partnerships work only if there is strong and effective local leadership to bring that co-ordination about, and my hon. Friend is demonstrating effective leadership at a local level. As somebody who grew up in Nottingham, I am pleased to see it prosper, but I understand that it still faces very real challenges, inequalities and divides in terms of income and opportunity. I am therefore pleased to see my hon. Friend providing leadership in Nottingham, to hear and understand details of the concept of Nottingham as an early intervention city and to have the opportunity to respond to some of my hon. Friend’s points in this debate.

As my hon. Friend says, each child deserves a secure, safe and happy childhood and upbringing, and that is the best way to support later development and to allow children to fulfil their potential as they become adults. As my hon. Friend says, without a good start young people can enter a vicious cycle of poor outcomes, which they pass on to the next generation. Although we have done a lot since 1997 to support parents and communities and to make significant improvements in the lives of all children, it is still the case that not all children are benefiting equally. Children from disadvantaged backgrounds, including from a number of wards in my hon. Friend’s constituency, continue to face greater barriers to realising their potential than children from other, often more affluent families. As a Government who care about opportunity for all and about every child having the best start in life, we have a responsibility to address those issues.

In the 2005 pre-Budget report, the Government commissioned a review of children and young people to consider what more we could do to improve outcomes. The report set out three principles to underpin our approach. First, there should be rights and responsibilities—we needed to do more to support parents, but they had to meet their responsibilities to their children. Secondly, we would pursue an approach based on progressive universalism: support for all, but targeting greater support to where there is greatest need. Thirdly, we would operate on the principle of prevention—working to prevent poor outcomes for children, young people and their parents from developing in the first place.

In January, we produced a discussion document on the interim findings of our review on children and young people. Our aim is to ensure that those principles are effectively incorporated into the comprehensive spending review that we are currently conducting, and to build on the emerging success of the “Every Child Matters” strategy for local co-ordination. We want to make sure that those principles—in particular the preventive strand that my hon. Friend highlights—are incorporated into our spending decisions.

I should like to respond to some of my hon. Friend’s particular points. I agree that one of the important steps in moving to a more preventive approach is to understand properly the size of costs and benefits and to be able to make the case credibly that by investing to save, we can deliver long-term cost savings for local providers. One of the things that has struck me as I have conducted the work has been how often the evidence base is not satisfactory or good enough to make those judgments.

I give my hon. Friend one example of an issue on which I have worked closely—services for disabled children to promote their life chances; they are one subset of the issues that he has raised today. The evidence base is weak, patchy and often incomplete. However, when we have been able to collect better knowledge and information about the cost savings available from early intervention, the case has been made. To give one example, the early support pilots have shown that better outcomes are gained from giving better information to families with a disabled child and providing support for them and professionals to work out a plan of care early in life. In the long term, that—rather than waiting until things go wrong and difficult and much more costly care outside the home becomes necessary—saves money.

That is one example, but it is small; we need to accumulate such evidence bases much more widely. I am interested in the idea of Nottingham as an early intervention city and in how my hon. Friend seeks to improve the evidence base at a local level to make the case for spend to save. We would like to learn more of Nottingham’s progress on such issues, and I will be happy for the Treasury to come to Nottingham to see that emerging evidence and help in the work that my hon. Friend is leading.

My hon. Friend also suggested that with a better evidence base we could do more to shift the focus of policy and spending on to prevention and early intervention. The local government White Paper has committed to giving local areas more freedom to set local priorities, reducing the amount of central direction and allowing more freedom to shape spending to meet priorities—including, when the case can be demonstrated, more emphasis on prevention.

I am also interested in my hon. Friend’s suggestion to allow local areas to borrow funds in anticipation of future savings. Although as a Treasury Minister I can see potential pitfalls in that approach, it is right that we should consider the idea further and give it due attention to ascertain whether it is a way to strengthen the ability of local leadership to promote early intervention. As my hon. Friend acknowledged, we have produced funds to facilitate pump-priming—for example, the £780 million invested in the children’s fund in the past four to five years; one of that fund’s key aims is to deliver better preventive services. In addition, over the past seven years the invest to save budget has invested £420 million in projects, a number of which have been in the field of preventive support for children and families. By the end of next year, nearly a third of local authorities will have received support from the DFES to identify how to create service efficiencies that allow a move to prevention.

Case studies have been done by the DFES: in north Lincolnshire, a more preventive approach reduced re-registrations on the child protection register from 18 to 11.5 per cent.; and in Blackpool, the identification of cashable efficiency savings in children’s residential care released resources for prevention. I am keen to see what more can also be done in Nottingham to benefit from that kind of flexibility.

As my hon. Friend knows, in the Budget’s spending review we announced a significant investment in the capacity of children’s services for supporting prevention and early intervention as part of an overall increase in the education budget. It will rise by 2.5 per cent a year in real terms on average between 2007-08 and 2010-11. The review will build on the progress made against the “Every Child Matters” agenda by building resilience, providing greater responsiveness and personalisation of services, and offering proactive and preventive support for families who are facing severe difficulties caused by complex needs.

We recognise the need for early intervention and there will be implementation in respect of taking forward the ideas in our discussion paper—I am thinking in particular of the strands on high-risk, high-harm families, disabled children and their families, and youth services. We must ensure that spending on the early years is sustained through the primary school years and into the teenage years. Educational attainment is not enough, because this is about developing wider social and emotional skills to improve life chances and build resilience. That can be done only by ensuring that services are even more responsive and that we can engage children, young people and families in decisions about what is made available to support their own efforts and ambitions. That involves all the local services, the professionals in those areas, from head teachers to general practitioners, and others more widely.

My hon. Friend mentioned support for early intervention in Nottingham, and in particular support for health visiting and the nurse-family partnership scheme. The evaluations of nurse-family partnerships in the US suggest significant short-term and long-term benefits to mothers, children and wider society from intensive support to first-time parents with the highest levels of need. He cited that research in detail. It encouraged us to introduce Sure Start in the early years of this Government. It deliberately brings together education and health services for first-time parents in more deprived communities.

That research also shows why the Government announced last September that they would establish 10 projects to demonstrate models of health-led parenting support for parents of children from pre-birth to their teenage years. The work will build on the experience of the US and will involve a structured programme of home visits by trained health visitors and community midwives to test how the model is best applied in the UK. In particular, it will try to evaluate and quantify the long-term cost savings, including the wider, downstream costs to society, such as those associated with antisocial behaviour and criminality. My hon. Friend cited those in his speech.

We want to work with Nottingham to help build its capacity, so that it can be considered as a site for nurse-family partnerships in the future.

Will the Minister consider the possibility of the Treasury commissioning more work in this area? I am pleased that Treasury officials will come to Nottingham, but will he consider doing so in order to see the work that we are doing?

I would be happy to return to the city in which I grew up to meet my hon. Friend and his local strategic partnership. One thing that we could do would be to examine how this model of nurse-family partnerships in Nottingham could be part of the wider early intervention strategy that he is taking forward and leading. As I have said, local leadership makes change happen. It is only through local leadership that we can have effective early intervention. The kind of local leadership that is benefiting Nottingham is something that we want to learn from in the Treasury and the Government, so that we can spread best practice around the rest of the country, and I could learn from it by taking up the invitation to visit my home city as soon as possible.